BANGKOK – Kavita Wongyakasem runs a small business in Bangkok, owns a two-storey house on the outskirts of the Thai capital, drives a pick-up truck, and sends her two daughters to good schools.
But every day is a desperate struggle to find the money to keep her household afloat, said the 48-year-old, whose business provides services for a big energy company.
The sole breadwinner of a family of five is about 8 million baht ($236,000) in debt and has no cash savings.
Thailand has among the highest household debt to gross domestic product (GDP) ratios in Asia – behind only South Korea and Hong Kong, according to a Bank for International Settlements ranking – and millions of people, one in every three Thais, are trapped in debt.
The problem has become a key issue in a May 14 general election and all major parties have promised wage increases or debt moratoriums, along with guarantee-free loans and handouts.
Pita Limjaroenrat, the prime ministerial candidate of the opposition Move Forward party, which has proposed annual minimum wage revisions, said he would look to fix Thailand’s long-standing inequality problem.
“If you do the maths, it’s about 1 percent at the top and the 99 percent at the bottom,” said Pita, who has seen a late surge in popularity.
“Once you’re in debt, it’s very hard for you to move up the ladder.”
Thailand’s central bank is worried. In February, it said that household debt levels should be brought down from 86.9 percent of GDP at the end of 2022 to below 80 percent to help reduce financial risks.
Political parties’ extravagant election promises could increase the macro-economic risks posed by debt, analysts say.
Excluding overlapping policies, poll promises by nine major parties analysed in February could amount to 3.14 trillion baht ($92.52 billion), only slightly less than the annual budget of 3.18 trillion baht, the Thailand Development Research Institute think-tank estimated.
The election is building up to be another battle between parties aligned with the military-backed establishment and the populist opposition. Whoever wins will have to contend with the gnawing debt problem.
“High household debt rate means that it won’t be easy to lay out future policies to stimulate consumption because people are busy paying debts and asking the bank for loans,” said Thanavath Phonvichai, president of University of the Thai Chamber of Commerce (UTCC).
The debt burden starts early for many Thais and can last a lifetime.
Some 58 percent of people aged 25 to 29 are in debt, and a quarter of people over 60 have outstanding loans, averaging more than 400,000 baht ($12,000), central bank data shows.
In all, about 30 percent of those with credit cards or personal loans have a combined debt of 10-25 times their income, double that of international standards, according to the bank.
Although a sticky issue for years, the problem has become worse since the COVID-19 pandemic that nearly doubled the number of bad debt accounts to 10 million, according to the central bank.
The pandemic didn’t ravage Thailand’s 71 million people as much as it did those in some other countries but it hammered the heavily tourism-dependent economy and hit incomes. – Reuters
